(CHICAGO) — As the economy tops lists of voter concerns ahead of the 2024 election, some speakers at the Democratic National Convention have sought to emphasize how much the economy has improved under President Joe Biden.
When Biden took office in early 2021, the U.S. was in the midst of the “worst economic downturn since the Great Depression,” Sen. Bernie Sanders, I-Vt., said on Tuesday. Back then, the economy was “reeling,” said former President Barack Obama later in the night.
The claims contrast with Republican depictions of the downturn in 2020 and the ensuing recovery. Former President Donald Trump has faulted COVID-19 for derailing the nation’s economy, while saying the U.S. had recovered in some areas by the time Biden took office.
“Nobody’s ever seen an economy [like ours] pre-COVID, and then we handed over a stock market that was substantially higher than just prior to COVID,” Trump said at the Republican National Convention last month.
An accurate picture of recent economic performance defies the narratives put forward by both parties, economists told ABC News.
The economy had already emerged from the pandemic-induced recession and begun to recover by the time Biden took office, experts said. However, the U.S. remained well below pre-pandemic levels in some key measures of economic health, including employment. Biden faced the difficult task of revitalizing the economy and getting Americans back to work, they added.
“There are kudos to be given to all the different sides,” Frederick Floss, an economics professor at Buffalo State University, told ABC News. “It’s very complex.”
Before the COVID-19 outbreak, the economy performed robustly by some important measures. In February 2020, the unemployment rate stood at 3.5%, matching its lowest level in more than 50 years. Inflation-adjusted gross domestic product increased at a solid annualized clip of 2.1% over the final three months of 2019.
The onset of the pandemic — as well as ensuing shutdowns across much of the U.S. — plunged the economy into a recession. On March 12, 2020, the S&P 500 plummeted nearly 10%, registering its worst single-day performance in more than three decades. The following month, the unemployment rate skyrocketed to almost 15%.
In March 2020, Trump signed into law a $2.2 trillion economic stimulus package, including direct payments of $1,200 and expanded unemployment insurance, among other measures. Months later, in December, Trump enacted a second $900 billion round of government support.
Over the period, much of the economy reopened and business activity returned to something resembling normal.
In turn, economic growth soared over the second half of 2020. The unemployment rate fell to 6.7% by the end of the year, nearly double pre-pandemic levels but well below the peak reached right after the outbreak. The Dow Jones Industrial Average and the S&P 500 ended the year at record highs.
The COVID-induced recession lasted two months in the spring of 2020, the shortest U.S. recession ever recorded, according to the National Bureau of Economic Research, a non-profit organization that serves as the recognized authority on economic downturns.
Economists disagreed over the extent to which Trump deserves credit for the initial recovery, saying it resulted from a mix of federal support that he had enacted as well as the withdrawal of restrictions imposed by state and local governments.
“It was a very short-lived recession,” Matias Vernengo, a professor of economics at Bucknell University, told ABC News. “That obviously happened under the Trump administration.
Jesse Rothstein, a professor of public policy and economics at the University of California, Berkeley, added: “It’s faster than we’ve ever seen in any previous crisis but no other recession has had that form where we locked everybody up. It’s much easier to get it back when demand is still there.”
Despite its improvement over the latter part of 2020, the economy remained far from healthy when Biden took office, especially on the all-important issue of employment, economists said.
The U.S. lost 21.9 million jobs in March and April of 2020, U.S. government data showed. At the outset of the following year, the economy still stood about 10 million jobs short. In addition, pandemic-induced bottlenecks continued to snarl supply chains, restricting economic output worldwide.
“A fair statement is that the economy at the end of 2020 had recovered substantially but there were still millions of job losses that the economy hadn’t recovered from,” Dennis Hoffman, an economist at Arizona State University, told ABC News.
Rothstein, of the University of California, Berkeley, said the economy remained in peril at the outset of the Biden administration in early 2021.”I think calling it an economic crisis is totally fair,” Rothstein said.
Still, Rothstein added: “We did some right things in 2020 and we did some right things after 2020.”
In March 2021, Biden signed a $1.9 billion economic stimulus package of his own, including another round of $1,400 direct payments as well as an expansion of the child tax credit. The following year, Biden enacted the $891 billion Inflation Reduction Act and the $280 billion CHIPS and Sciences Act.
Over the course of the Biden administration, the labor market expanded at a rapid pace while economic growth quickened. By 2022, the economy had recovered all of the jobs lost during the pandemic. In January 2023, the unemployment rate fell even lower than where it stood pre-pandemic.
Economists who spoke with ABC News credited Biden-backed government stimulus for the reemergence of U.S. economic strength, but they differed over whether the spending had contributed to a severe bout of inflation experienced during that period.
“We were able to recover as an economy and job creation has been pretty remarkable,” said Hoffman, of Arizona State University. “That became a very successful program — it also brought inflation.”
Jason Furman, a professor at Harvard University and former economic adviser to President Barack Obama, estimated that Biden’s American Rescue Plan added between 1 percentage point and 4 percentage points to the inflation rate in 2021, Roll Call reported. Michael Strain, of the conservative-leaning American Enterprise Institute, estimated that the legislation added 3 percentage points to inflation.
Vernengo, of Bucknell University, disagreed, attributing the bout of inflation to an imbalance of supply and demand that arose in the aftermath of the pandemic. “Inflation has more or less vanished,” Vernengo said, saying the moderation of prices indicates that the problem owed primarily to a temporary economic shock.
Price increases have cooled significantly from a peak of more than 9%, but inflation remains nearly a percentage point higher than the Fed’s target rate of 2%.
Vernengo, of Bucknell University, said both major parties have offered up misleading accounts of the 2020 economic downturn and the recovery that took hold afterward. “The story is somewhere in the middle,” Vernengo said.
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